If you report on the environmental issues surrounding hydraulic fracturing and shale natural gas, you’ll hear a certain line from gas industry representatives over and over: there has never been a documented case of groundwater contamination by fracking. There are angry homeowners who say that fracking has spoiled their water supply, and suspicious incidents across the country and even scientific studies that have indicated that drilling may allow methane to infiltrate groundwater supplies. But industry defenders can say that there hasn’t yet been a clearly documented case of fracking fluids—the sometimes toxic chemicals injected deep into the ground during the hydrofracking process—actually leaking into and contaminating groundwater supplies.

But that may well be changing. The Environmental Protection Agency (EPA) has release a draft report—download the PDF here—of an investigation into possible groundwater contamination in Pavilion, Wyoming, where shale gas drilling and hydrofracking had taken place. (See this report from ProPublica’s Abrahm Lustgarten on the Pavilion and its woes with fracking.) The conclusions will be troubling for industry: the EPA found evidence of chemicals associated with gas production in the area’s aquafier, and the “data indicates likely impact to groundwater that can be explained by hydraulic fracturing.” In other words: there are chemicals in Pavilion’s water that shouldn’t be there, and they likely came from fracking.

EPA constructed two deep monitoring wells to sample water in the aquifer. The draft report indicates that ground water in the aquifer contains compounds likely associated with gas production practices, including hydraulic fracturing. EPA also re-tested private and public drinking water wells in the community. The samples were consistent with chemicals identified in earlier EPA results released in 2010 and are generally below established health and safety standards. To ensure a transparent and rigorous analysis, EPA is releasing these findings for public comment and will submit them to an independent scientific review panel. The draft findings announced today are specific to Pavillion, where the fracturing is taking place in and below the drinking water aquifer and in close proximity to drinking water wells – production conditions different from those in many other areas of the country.

The EPA was quick to caution that what’s happening in Pavilion—where the gas fields in question were run by the Canadian company Encana—isn’t necessarily indicative of drilling and fracking procedures elsewhere in the country, including in Pennsylvania’s hotly contested Marcellus Shale region. In the Marcellus, most gas plays involve rock layers located 1 to 3 km below the surface—usually well below any aquafiers, which are usually only a couple hundred meters below the ground. In Pavilion, by contrast, the fracking was happening in vertical wells—the Marcellus wells are horizontal—that in some places are as shallow as 372 meters below the surface. That’s not much deeper than the groundwater, making it that much easier for any leaked chemicals to find their way into groundwater. A number of wells in the area also lack surface casing—protective cement sleeves that should prevent drilling fluids or methane from leaking out.

For its part, Encana denied that fracking from its wells had poisoned the groundwater of Pavilion, as company spokesperson Doug Hock told Bloomberg:

“They’ve used terms like ‘likely,’” Hock said today in an interview. “What they’ve come up with here is a probability. It’s not a definitive conclusion.”

Synthetic chemicals discovered in the aquifer are just as likely “the result of contamination from their own sampling,” he said.

Not much surprise there—the gas industry has rejected almost every argument that fracking and drilling might pose a threat to water supplies. But environmentalists—correctly, I think—seized on news of the EPA’s investigation as a possible gamechanger in the politics over fracking. From Mark Brownstein, chief counsel of the energy program at the Environmental Defense Fund—a green group that has been more open to shale gas than most:

The report reads like a primer on what NOT to do when developing unconventional gas. It’s all here: poor cement quality, cement not injected to the proper depth to isolate the well from the groundwater, fracturing activity taking place in close proximity to the water table (in itself a questionable practice, but in this case, particularly egregious given the lack of cap rock between the zone of fracture and the groundwater), soil contamination around waste water pits indicating spills at the surface that migrated to groundwater and lack of clarity about what went down the well because of incomplete disclosure of the chemicals used in the fracturing process.

This draft report is Exhibit A on why stronger regulation and enforcement is necessary if the general public is EVER going to believe that shale gas development is a safe source of natural gas.

The question now is what impact environmental concerns might have on the shale gas industry, which really has been poised to explode. There’s a civil war brewing in New York over hydrofracking, with public hearings into the practice—which is officially on moratorium in the state—exploding with angry voices on both sides. States like Delaware, New Jersey and Pennsylvania are divided over whether fracking should be allowed near the Delaware River basin, which supplies drinking water for millions. The EPA has launched more comprehensive studies into the potential impacts of fracking and drilling on water supplies, while Republicans in Congress are ready to go nuclear over any perceived shale gas slowdown.

Personally, I still feel the way I did when I wrote TIME’s cover story on fracking last year: shale gas is a potentially very valuable resource for the U.S., one that could help us reduce air pollution and carbon emissions by replacing dirty coal generation. But there are still major questions about the environmental effects of shale gas drilling and fracking—especially as it scales up and moves to more crowded parts of the country. The EPA’s draft study in Pavilion only underscores those concerns—and shows why many Americans are still hesitant to embrace the fracking revolution.